ECB Cuts Rates, Downgrades Inflation & Growth

2025-06-05 12:17 By Agna Gabriel 1 min. read

The ECB cut key interest rates by 25 bps at its June meeting, based on updated inflation and economic forecasts.

Inflation is near the 2% target, with projections showing 2.0% in 2025 (vs 2.3% previously), 1.6% in 2026 (vs 1.9% previously), and 2.0% in 2027.

Core inflation (excluding energy and food) is seen at 2.4% in 2025, then easing to 1.9% in 2026–2027.

GDP growth is forecast at 0.9% in 2025, 1.1% in 2026 (vs 1.2% previously), and 1.3% in 2027, supported by higher real incomes, strong labour markets, and rising government investment, despite trade policy uncertainties weighing on exports and business investment.

Scenario analysis shows trade tensions could reduce growth and inflation, while resolution could boost both.

Wage growth is still high but slowing, and corporate profits are helping absorb cost pressures.

President Lagarde said that the central bank is approaching the end of a cycle, suggesting a pause may be on the horizon following today’s reduction.



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